A Woburn business owner has pleaded guilty on charges he failed to accurately report his total payroll or number of employees to avoid insurance premium costs last week.
Edward App, 50, pleaded guilty in Middlesex Superior Court to charges of Workers’ Compensation Fraud (4 counts) and Larceny Over $250 (3 counts) on Nov. 26. App was sentenced to 2.5 years in the House of Correction, suspended for two years, and two years probation. He was also ordered to pay full restitution, according to a statement from Attorney General Martha Coakley.
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According to Coakley, App is the owner and sole proprietor of App Tree Inc. (App Tree), a tree service company based in Woburn.
The AG's office became involved in App Tree after an employee received life-threatening injuries when crushed by a falling tree. An insurance claim was filed after the incident, resulting in $700,000 being paid out by the insurance company.
According to authorities, App Tree was assigned to AIM Mutual Insurance Company (AIM) through the Assigned Risk Pool for workers’ compensation insurance in 1999.
Authorities allege that in an effort to evade high insurance premiums, App reported to AIM that he was the sole employee of the company and failed to disclose any information about additional employees. Based on his report, App was granted the minimum premium rate on his policy. But investigators believe that App employed at least two full-time employees and a number of part-time workers between 2005 and 2009.
As a result of this alleged premium avoidance scheme, App underpaid his workers’ compensation insurer a total of $42,115 in premium payments, stated the AG's office. Additionally, AIM paid more than $700,000 in medical and disability payments to the injured employee.
“The defendant undermined the safety of his workers by intentionally making false representations to his insurance company to avoid paying the proper premium for his workforce,” said Coakley. “We bring these cases to protect employees and to level the playing field for businesses that play by the rules.”
“This type of insurance fraud is a priority of the Insurance Fraud Bureau of Massachusetts because it impacts all citizens and businesses of Massachusetts,” said Daniel J. Johnston, Executive Director of the Insurance Fraud Bureau of Massachusetts (IFB). “When a business owner lies about the company’s payroll, this artificially lowers the workers’ compensation insurance premium, sometimes dramatically. This gives that business owner an unfair advantage over honest businesses when competing for work.”
App was indicted by a statewide Grand Jury in June and later arraigned at Middlesex Superior Court in July. At the time, he pleaded not guilty and was released on personal recognizance.
On Monday, Nov. 26, App changed his plea to guilty and was sentenced.